The CEO of Australia’s last major construction company on the brink of collapse died days before crisis talks.
Construction giant Metricon is in urgent crisis talks with customers after falling into financial disputes.
Sales staff within the company have been instructed to boost cash flow by securing more deposits, the Herald Sun reported on Wednesday.
Metricon bosses are due to meet key clients, including the Victorian government, on Thursday.
Earlier this week, the company’s co-founder and CEO, Mario Biasin, died suddenly at the age of 71.
The company confirmed that Mr. Biasin suffered from mental health problems.
In a statement, Metricon executive Ross Palazzesi said his colleague’s sudden death came as a shock.
“As friends and colleagues of Mario, we are shocked and so saddened by the news,” he said Monday.
“Our hearts and thoughts go out to the Biasin family. We will ensure that Metricon Homes continues all operations and on-site construction as usual during a very emotional time.
A few days later, however, the company began crisis talks.
Metricon employs around 2,500 people, primarily in eastern Australia, where it has a pipeline of around 4,000 homes under construction.
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Interim CEO Peter Langfelder denied the company had solvency issues and said the business remained viable.
“There is simply no basis to these rumours. Metricon is a solid and viable company with no solvency issues,” he said.
The biggest challenge facing Australia is getting more homes built for more Australian families and as the country’s largest homebuilder, we are the ones delivering.
Construction companies across Australia are facing tough circumstances amid rising material costs and labor shortages.
Earlier this year, giants Probuild and Condev went into liquidation, affecting thousands of employees and contractors.
Government efforts to support construction during the pandemic have increased production rates beyond what major supply chains can sustain.
Metricon tried to modify, offload or delay the contracts to help deal with the constraints.
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A salesperson told the Herald Sun he owed hundreds of thousands of dollars in commission and was pressured to get more cash to help keep the business afloat.
“We are now under pressure to get as many deposits as possible,” they said.
“They’re at 5%, so on an $800,000 build, that’s a $40,000 payment – buyers would then be charged as the build progresses, for the slab, then the frame , and so on.”
Mr. Langfelder said the goal was for the business to continue operating as usual following the sudden loss of Mr. Biasin.
“We are focused on keeping the business running smoothly, serving all of our customers and continuing to deliver homes to site and finish them on time,” he said.
“We sent the message to our team that the objective is to carry on as usual, as Mario would have liked.”
Partner at Jirsch Sutherland, Andrew Spring explained that rising interest rates would put further pressure on the construction sector as a whole and “inevitably” lead to many more insolvencies.
“Rising interest rates raise concerns that they will dampen or eradicate the housing boom to such an extent that the buyer fears that the value of their property will continue to rise and that they may in fact decline,” he told Nine. news.
As one of Australia’s largest property developers, Metricon is vulnerable to changes in property values, as experts have pointed out following the recent rise in interest rates.
Last week, HSBC’s chief economist for Australia and New Zealand, Paul Bloxham, predicted rates would rise to 1.35% by the end of 2022 and hit 1.85% at the start of 2023, warning that the changes would cause the real estate market to fall by 16% over the next two years.
“The pace of house price growth has slowed recently, however, so that house prices are up only 1% since the start of 2022, after a 21% gain,” Mr Bloxham said.
“The Sydney and Melbourne housing markets have stalled since the start of the year.”
In response, HSBC revised its housing price forecast for 2023 from 1-4% growth to a whopping 5-10% fall.
Chief economist at AMP Capital, Shane Oliver also predicted a major fall in the real estate market, centered on Sydney and Melbourne, which he said would fall by 15% by the end of 2023 or the start of 2024.